All Forum Posts by: Nathan Grabau

I am still underwriting STR deals for clients in CO that have entry prices over 500k at 15% CoC returns and 40-50% overall returns. You can also cashflow when the 1% rule does not apply to a property. I would actually run real numbers and see how much flexibility you have.

I agree the bank collapse is going to help the housing market, but there is no reason to believe the market was going to collapse. Outside of new construction, which buys down everyones rates, most sellers are buyers, and there is no reason for a seller to sell their home to go buy one at an interest rate double their current one. There is also no exotic debt structures anymore in RE really. 

How important is it that they are local to you? F9 Productions in Colorado is fantastic, lean, and focused on efficient for construction designs. They also have a local GC wing here, so they actually have been able to be very strategic with how do they do sophisticated designs, that are practical and cost efficient to build. 

If you send me a DM I am happy to get you directly in touch with them! 

I would charge them the gap between what you thought it could be sold for as used before they moved in vs used now they they have moved in. This is the fairest way to handle the gap, because it is how it is impacting you, and it takes into consideration its used value vs the replacement value. 

Very very very basic guess for rehab is around $50 a foot. Get a contract through before you close on the deal. This number can move very fast with things that do not seem major at all. 

Not seeing any condos for rent in your area is a good sign, it likely means that they fly off the market when they are listed. Since you have some time, I would check zillow daily for new rental listings in your area, and watch the market that way. You could keep a list of what condos are listed for, their quality, and how fast they rent. While there are more automated ways to do this, I personally love the manual way as it really will make you are a market expert in your area, and will lead to you having a competitive advantage on future purchases you make in the area. 

I am not getting 20 CoC, I am getting a 20 overall return on new money. I cannot refi on properties that I already own, with a low interest rate efficiently. So if I am picking between a renovation and new acquisition, the renovation has to be able to deliver the entire return I would expect from another property, as cash.

It is the same reason why condotels has to be underwritten differently than a condo. The financing terms are different. I cannot finance a renovation in the same way that I finance a new purchase. 

 I can deploy new cash and earn 20% all day easily. Because of high rates, I cannot refi properties efficently that I bought a year or more ago, so unless I have an occupancy or safety problem, I will not do renovations that can drive rent increases like that. If @Asha Carpenter spends 8k redoing that kitchen, it should not be that hard to get another $133 a month, that is 20%. It has to be CoC, because of where rates are today. It actually is a very strategic decision.

This is probably obvious and not a deal killer for sub2, but you are under water day 1 and your break even number is 16 months out on paper, and 24 months out if you have to sell. If you have to sell this property between now and April of 2025, you are going to sell it at a loss. 

Because of the nature of the numbers, it is going to be almost impossible to get someone to loan you 60k, at a 120% loan to value. What I mean is the person who loans you the money, does not have an collateral to cover themselves, because if the property is worth 120k, but you owe 79k, pay the owner 30k and put 30k into rehab, and borrow all of that, you owe 140k on a 120k property. 

With the sub2, it will probably be really hard to even get someone to come in and put a second on it at all. But maybe you could find a private money lender that would take a 2nd to pay for the rehab at 30k and then offer the owner 10k up front and then another 500 a month for 40 months. 

This gets tough tho, because now you are probably straining your cashflow on the deal. 2k a month- 700 mortgage - 300 misc expenses - 500 to the owner - 500 to the hard money lender and you are at 0 in cash flow. That being said, you are paying off 1k in debt a month with this model, but are still 10k underwater.

I would not spend money that does not make you more money, unless you start to have an occupancy problem. I need to see 20% CoC returns to pull the trigger on rehabs where there is not an occupancy problem.